The Mumbai Tribunal has held that minimum alternate tax is levied on real book profits which have been earned by the companies. It cannot be levied on the artificial income, which has not accrued to the companies, but has been credited to the profit and loss account as per the accounting policies. In the case considered by the tribunal in this respect, the assessee was entitled by a scheme of government, to defer the payment of the sales tax collected, and was crediting the same to separate account as deferred liability. In the relevant year it revalued the liability at its present value and credited the difference to the profit and loss account. While computing book profits under section 115JA, it deducted the revaluation profit. The assessing officer disallowed the same. The Tribunal observed that items not having the character of the income should not form part of the book profit even though such items are credited to the profit and loss account.
Deduction for demat expenses
THE Bangalore Tribunal has recently said that amount paid to NSDL as one-time charges for converting its shares from physical certificate into dematerialise form are allowable expenditure under section 37(1). The assessee company paid certain amount to NSDL as one time charges for converting its shares from physical form to dematerialised form and claimed deduction of the same as a revenue expenditure. The AO held that since it was the liabilities of the respective shareholders to get shares converted into demat form and not that of the assessee-company, hence the expenditure was not allowable and even if liability was to be treated as that of assessee, the same was not allowable as revenue expenditure as the assessee derived an enduring benefit.